Medicaid expenditures and state responses

This overview summarizes issues addressed in this issue of the Health Care Financing Review, entitled "Medicaid and State Health Reform." Articles cover the following topics: growth in the level of expenditures for Medicaid and creative financing strategies by States to manage these increases; section 1115 demonstration waivers; States' experiences with implementing approved section 1115 demonstrations; how section 1115 demonstration waivers fit into larger State health reform efforts; and other reform efforts in two States.     

The relationship of post-acute home care use to Medicaid utilization and expenditures

RESEARCH OBJECTIVES: To describe the use of post-acute home care (PAHC) and total Medicaid expenditures among hospitalized nonelderly adult Medicaid eligibles and to test whether health services utilization rates or total Medicaid expenditures were lower among Medicaid eligibles who used PAHC compared to those who did not. STUDY POPULATION: 5,299 Medicaid patients aged 18-64 discharged in 1992-1996 from 29 hospitals in the Cleveland Health Quality Choice (CHQC) project. DATA SOURCES: Linked Ohio Medicaid claims and CHQC medical record abstract data. DATA EXTRACTION: One stay per patient was randomly selected. DESIGN: Observational study. To control for treatment selection bias, we developed a model predicting the probability (propensity) a patient would be referred to PAHC, as a proxy for the patient's need for PAHC. We matched 430 patients who used Medicaid-covered PAHC ("USE") to patients who did not ("NO USE") by their propensity scores. Study outcomes were inpatient re-admission rates and days of stay (DOS), nursing home admission rates and DOS, and mean total Medicaid expenditures 90 and 180 days after discharge. PRINCIPAL FINDINGS: Of 3,788 medical patients, 12.1 percent were referred to PAHC; 64 percent of those referred used PAHC. Of 1,511 surgical patients, 10.9 percent were referred; 99 percent of those referred used PAHC. In 430 pairs of patients matched by propensity score, mean total Medicaid expenditures within 90 days after discharge were $7,649 in the USE group and $5,761 in the NO USE group. Total Medicaid expenditures were significantly higher in the USE group compared to the NO USE group for medical patients after 180 days (p < .05) and surgical patients after 90 and 180 days (p < .001). There were no significant differences for any other outcome. Sensitivity analysis indicates the results may be influenced by unmeasured variables, most likely functional status and/or care-giver support. CONCLUSIONS: Thirty-six percent of the medical patients referred to PAHC did not receive Medicaid-covered services. This suggests potential underuse among medical patients. The high post-discharge expenditures suggest opportunities for reducing costs through coordinating utilization or diverting it to lower-cost settings. Controlling for patients' need for services, PAHC utilization was not associated with lower utilization rates or lower total Medicaid expenditures. Medicaid programs are advised to proceed cautiously before expanding PAHC utilization and to monitor its use carefully. Further study, incorporating non-economic outcomes and additional factors influencing PAHC use, is warranted.     

Effects of the Medicare Alzheimer's disease demonstration on Medicare expenditures

Applicants were randomized either into a group with a limited Medicare community care service benefit and case management or into a control group receiving their regular medical care. Analyses assess whether or not community care management affected health care use. A tendency toward reduced expenditures was observed for the treatment group, combining all demonstration sites, and when observing each separately. These differences were or approached statistical significance in two sites for Medicare Part A and Parts A and B expenditures averaged over 3 years. Expenditure reductions approached budget neutrality with program costs in two sites.     

End of life Medicare and Medicaid expenditures for dually eligible beneficiaries

In 1995, combined Medicare and Medicaid spending in the last year of life for dually eligible beneficiaries was more than $40,000 per beneficiary. Medicaid's share, primarily for long-term care (LTC), constituted about 40 percent of the total. Beneficiaries under age 65, Black persons, and individuals who died in a hospital had higher than average expenditures. The vast majority (86 percent) received some form of supportive services (nursing home, home care, hospice services). It is critical that policy deliberations consider both acute and LTC use concurrently because of their extensive use by dually eligible beneficiaries, as well as the interaction of the two funding sources (Medicare and Medicaid) that cover them.     

Effects of Medicaid managed care programs on health services access and use

OBJECTIVE: To estimate the effects of Medicaid managed care (MMC) programs on Medicaid enrollees' access to and use of health care services at the national level. DATA SOURCES/STUDY SETTING: 1991-1995 National Health Interview Surveys (NHIS) and a 1998 Urban Institute survey on state Medicaid managed care programs. STUDY DESIGN: Using multivariate regression models, we estimated the effect of living in a county with an MMC program on several access and use measures for nonelderly women who receive Medicaid through AFDC and child Medicaid recipients. We focus on mandatory programs and estimate separate effects for primary care case management (PCCM) programs, health maintenance organization (HMO) programs, and mixed PCCM/HMO programs, relative to fee-for-service (FFS) Medicaid. We control for individual and county characteristics, and state and year effects. DATA COLLECTION/EXTRACTION METHOD: This study uses pooled individual-level data from up to five years of the NHIS (1991-1995), linked to information on Medicaid managed care characteristics at the county level from the 1998 MMC survey. PRINCIPAL FINDINGS: We find virtually no effects of mandatory PCCM programs. For women, mandatory HMO programs reduce some types of non-emergency room (ER) use, and increase reported unmet need for medical care. The PCCM/HMO programs increase access, but had no effects on use. For children, mandatory HMO programs reduce ER visits, and increase the use of specialists. The PCCM/HMO programs reduce ER visits, while increasing other types of use and access. CONCLUSIONS: Mandatory PCCM/HMO programs improved access and utilization relative to traditional FFS Medicaid, primarily for children. Mandatory HMO programs caused some access problems for women.     

Explaining state Medicaid nursing home reimbursement

Medicaid nursing home reimbursement methods and per diem rates affect costs, quality, equity, and access. State rate-setting is a laboratory of policymaking, which can inform state and federal Medicaid reform initiatives. This paper explains state Medicaid nursing facility rates in 1979-1994. Findings suggest that prospective facility-specific methods constrained rates in some but not all periods, particularly when older cost-reports were employed in rate-setting. Analysis failed to show that prospective class rate-setting methods constrained rate increases. Findings suggest that the efficacy of reimbursement methodology to control rates depends upon wider health care policy trends and that future facility-level analyses should consider policy contexts as between states.     

Effects of Medicaid disease management programs on medical expenditures: Evidence from a natural experiment in Georgia

In recent decades, most states’ Medicaid programs have introduced disease management programs for chronically ill beneficiaries. Interventions assist beneficiaries and their health care providers to appropriately manage chronic health condition(s) according to established clinical guidelines. Cost containment has been a key justification for the creation of these programs despite mixed evidence they actually save money. This study evaluates the effects of a disease management program in Georgia by exploiting a natural experiment that delayed the introduction of high-intensity services for several thousand beneficiaries. Expenditures for medical claims decreased an average of $89 per person per month for the high- and moderate-risk groups, but those savings were not large enough to offset the total costs of the program. Impacts varied by the intensity of interventions, over time, and across disease groups. Heterogeneous treatment effect analysis indicates that decreases in medical expenditures were largest at the most expensive tail of the distribution.     

Managed care and medical expenditures of Medicare beneficiaries

This paper investigates the impact of Medicare HMO penetration on the medical care expenditures incurred by Medicare fee-for-service (FFS) enrollees. We find that increasing penetration leads to reduced spending on FFS beneficiaries. In particular, our estimates suggest that the increase in HMO penetration during our study period led to approximately a 7% decline in spending per FFS beneficiary. Similar models for various measures of health care utilization find penetration-induced reductions consistent with our spending estimates. Finally, we present evidence that suggests our estimated spending reductions are driven by beneficiaries who have at least one chronic condition.     

How state-funded home care programs respond to changes in Medicare home health care: resource allocation decisions on the front line

OBJECTIVE: To examine how case managers in a state-funded home care program allocate home care services in response to information about a client's Medicare home health care status, with particular attention to the influence of work environment. DATA SOURCES/STUDY SETTING: Primary data collected on 355 case managers and 26 agency directors employed in June 1999 by 26 of the 27 regional agencies administering the Massachusetts Home Care Program for low-income elders. STUDY DESIGN: Data were collected in a cross-sectional survey study design. A case manager survey included measures of work environment, demographics, and factorial survey vignette clients (N = 2,054), for which case managers assessed service eligibility levels. An agency director survey included measures of management practices. DATA COLLECTION/EXTRACTION METHODS: Hierarchical linear models estimated the effects of work environment on the relationship between client receipt of Medicare home health care and care plan levels while controlling for case-mix differences in agencies' clients. PRINCIPAL FINDINGS: Case managers did not supplement extant Medicare home health services, but did allocate more generous service plans to clients who have had Medicare home health care services recently terminated. This finding persisted when controlling for case mix and did not vary by work environment. Work environment affected overall care plan levels. CONCLUSIONS: Study findings indicate systematic patterns of frontline resource allocation shaping the relationships among community-based long-term care payment sources. Further, results illustrate how nonuniform implementation of upper-level initiatives may be partially attributed to work environment characteristics.     

Interactions between Medicare and Medicaid home care in Connecticut: responses to the 1997 BBA

Although overlaps exist in the provision of home care services financed by Medicare and Medicaid, interactions of the two funding sources at the beneficiary and home care provider levels have not been widely studied. The recent dramatic declines in Medicare home health spending present a rare opportunity to examine how changes in Medicare spending can affect the provision of Medicaid home care services. We conducted a study of Medicare-Medicaid dynamics in the state of Connecticut to shed light on the inter-relationships of the two funding sources.     

Medicaid nursing home reimbursement policies, rates, and expenditures.

Nursing home expenditures, along with those of hospitals, have been a target of cost containment efforts because they constitute a growing share of overall public expenditures for health. Of the total $287 billion spent on personal health care in 1982, $27 billion (9.5 percent) was spent on nursing home care (Gibson, Waldo, and Levit, 1983). Nationally, nursing home expenditures increased at a rate of 17.4 percent between 1980 and 1981 and 12.9 percent between 1981 and 1982, more rapidly than overall health care expenditures (Gibson, Waldo, and Levit, 1983).     

Socioeconomic status and medical care expenditures in Medicare managed care

This study examined the effects of education, income, and wealth on medical care expenditures in two Medicare managed care plans. The study also sought to elucidate the pathways through which socioeconomic status (SES) affects expenditures, including preferences for health and medical care and ability to navigate the managed care system. We found that education, income, and wealth all affected medical care expenditures, although the effects of these variables differed across expenditure categories. Moreover, the effects of these SES variables were much smaller than the effects found in earlier studies of fee-for-service Medicare. The pathway variables also were associated with expenditures. Accounting for the pathways through which SES affects expenditures narrowed the effect of SES on expenditures; however, the change in the estimates was very small.     

Medicaid home and community-based care waiver programs: providing services to people with AIDS

The authors present the results of a survey demonstrating how Medicaid programs use the home and community-based waiver programs to provide services to people with acquired immunodeficiency syndrome (AIDS) and to other targeted groups. The survey identified a number of waiver services that are effective at meeting the care needs of people with AIDS, such as case management, personal care, respite care, home intravenous therapy, attendant care, hospice, and home-delivered meals. The study demonstrates that in addition to the AIDS-specific waiver program, State Medicaid programs use the home and community-based care waiver programs for the elderly and disabled to provide services to people with AIDS because of their disability status.